RUSSIA IS ABOUT TO RUN OUT OF MONEY – THEN WHAT HAPPENS?

RUSSIA IS ABOUT TO RUN OUT OF MONEY – THEN WHAT HAPPENS?

Times are tough are over… but especially if you are Vladimir Putin and trying to make Moscow’s ends meet.

William Browder, who has been a perennial critic of the Russian head of state, was interviewed by CNBC over the last couple of days and pointed out just how bad things are and how much worse they could soon become. To quote him precisely: ‘When Russia runs out of money, the REAL trouble will begin’.

The primary factors influencing Russia are, as I have pointed out before, the crash of oil prices (now flirting with $27/barrel), and the fall of the Ruble against the Dollar. Just a few months ago, 50 rubles would buy you a dollar. Now you have to pile up 83 rubles to exchange them for a dollar.

The London expert warned that Vladimir Putin’s nation is being destabilised thanks to oil prices. William Browder, the CEO of Hermitage Capital – a Russian-focussed investment vehicle, gave the warning. “I don’t think you can underestimate how bad the situation in Russia is right now, you’ve got oil below any measure where the budget can survive and you’ve got sanctions from the West. Russia is in what I’d call a real serious economic crisis”. Browder worries for his safety – especially given the possibility that Putin has agents drop Plutonium in cups of tea for Londoners (former Russian emigres) who don’t like his tactics. (In 2005, Browder was booted out of Russia while a friend was arrested investigating Putin).

Combining the price of oil with sanctions by the West against Russia (and its monied oligarchs), put Putin behind the “eight ball”. First, it was sanctions due to his move to annex Crimea. Then it grew to placing “little green men” (uniformed but not identifiable Russian regulars) to perform policing duties inside the Ukraine (in the Donbass Region). More recently, Russia ventured into expensive military operations in Syria where it has completed thousands of sorties in an attempt to bolster Bashar al-Assad. This action was not because they were enamored with Assad, but because keeping him in power secured their naval base at Tartous and their airfield at Latakia. Just within the past week, Assad traveled to Moscow where rumor has it his reception was colder than the Russian winter. It now appears that Russia wants a change in Damascus – but Assad is not eager to oblige. Getting rid of Assad would be something that Putin and Obama could agree on, but only if Putin could get comfortable that his military interests in the Mediterranean would be protected. That is not something that the U.S. is about to guarantee.

Regardless, economic matters are now going critical for Mr. Putin:

Russia’s Central Bank is stressed. Banks in Russia are failing.

The country remains in recession for the second year in a row.

The country’s GDP dropped by 3.7 per cent last year. More to come.

Russia’s central bank is barely keeping the economy together by burning through its cash reserves.

No doubt, economic troubles have led Mr Putin to become intensely nationalistic in his approach. According to Forbes, this tact has resulted in Putin becoming the world’s number one most respected leader. Putin has beaten Barack Obama in this contest and now stands as the world’s top power broker. Putin’s talk tough keeps the opposition at bay in Moscow and makes some Americans envious of Russians having such a macho leader. Perhaps that is some consolation for the Russian President. But for how long?

What’s a Russian President to Do?

Perhaps the best path forward is to find a way to drive the price of oil back up to $100/barrel. Could an attack of some sort that disrupts the world’s oil supply help matters? Could a false flag action turn things around for Putin? Could a war be started and then blamed on somebody that puts the world in crisis mode? Maybe Russia would like Israel to attack Iran after all? That would surely make the price of oil go up by at least 400% in a hurry.

I don’t have any insights on what crisis is in store for the world. But no one is winning with the price of oil in the tank – except consumers – and what matters to us doesn’t count for very much in this world. So whether you are American oil company, an OPEC member, the Iranians who are eager to sell oil in the marketplace, or the Russian President who needs the price of oil to be at least $50/barrel to make his budget work, something is likely to happen soon. Very soon. Expect an unexpected military action any minute now. No one can afford to allow the economic crisis to continue for much longer.